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Impact Investing as an Object of Research. 2022 Publications Digest

Elizaveta Zakharova

DOI 10.55140/2782-5817-2022-2-2-68-81

A number of publications appeared by mid-2022, dedicated in one way or another to the issue of impact investing. Numerous articles, literature reviews and case studies attempt to identify the current status of the social investing sector and review the past experience – in other words, trying to figure out "where we are".

Elizaveta Zakharova

PhD student at the HSE Faculty of Social Sciences

Researchers are recording a rapid expansion of the social investment market, and although it is still notably small, there are many new contexts and problem areas waiting to be explored. Publications highlight the emerging phenomenon of impact washing, engagement of impact investing into women’s philanthropy and gender issues, and papers appear describing studies of local markets as well as studies of government intervention and political initiatives.

These and other topics are covered in our regular digest of impact investing publications for the first half of 2022.

NEW TRENDS IN WOMEN'S PHILANTHROPY

2022, Generosity and Gender. Palgrave Macmillan, Lois A. Buntz

As fundraisers and organizations across the globe continue to work in the field of women’s philanthropic initiatives, new trends, innovations and exciting connections happen every day. Some of these are emerging in existing nonprofits, others are collaborations with for-profit partners, HNW philanthropists and women’s foundations. Several areas of emerging trends will be explored in this chapter, including Impact and Gender Lens investing, LLCs as alternatives to family foundations, and the Maverick Collective, Emerson Collective, Blue Meridian and the Audacious Project.

https://clck.ru/iZYjo

THE IMPACT OF SOCIAL INVESTING ON CHARITABLE DONATIONS

2022, Management Science. lake An, Donnel Briley, Shai Danziger, Shai Levi

We examine the impact of social investing on charitable donations using a unique data set consisting of investment behaviors and donation transactions for more than 10,000 customers of an investment app platform. We find that investors switching to a recently introduced social fund reduced their donations, mainly in charities supporting causes similar to those of the social fund. However, 79 % of the investors that switched to the social fund did not donate before switching, so the social fund attracted more people to fund social causes. Still, because of the substitution effect, we estimate social funds have a positive effect on society only if their annual contributions to social causes are greater than 3.2 % of the balance invested.

https://clck.ru/iZ94m

IMPACT INVESTING AND NEW SOCIAL FUNDING, CHAPTER IN THE BOOK "ORGANIZING FOR SUSTAINABLE DEVELOPMENT: ADDRESSING THE GRAND CHALLENGES"

2022, Routledge. Federica Angeli, Ashley Metz, Jorg Raab

This chapter introduces readers to the idea of impact investing and how its definition has evolved in the literature. It also introduces the organizational actors involved and the instruments they use. Asset owners, such as retail investors, private foundations or sovereign wealth funds, hold the capital and decide about its allocation along the impact capital chain, thus deciding the impact orientation of the capital. All the actors belong to an ecosystem, where each member plays a critical role in trying to mitigate the risk of impact investments and expand the pipeline of investable opportunities. The analysis of the business model is, thus, a driving factor in understanding the organizational actors targeted by impact investing capital providers and in differentiating them in respect to those targeted by other types of social finance. The chapter concludes with a discussion of delivering on the promise of impact investing.

https://clck.ru/iYiM8

SOCIAL INVESTMENT PROJECTS: REGION-SPECIFIC RISKS

2022, Creative Economy. T. V. Bart, V. H. Martyniuk

In this article, the researchers review various actions stimulating investment in the social sphere, given the need to fight the consequences of the COVID-19 crisis and to maintain fiscal balance of the constituent entities of the Russian Federation. Regional development is analyzed by the tax potential index. The study highlights the advantage of the "Territory of Advanced Social and Economic Development" legal regime and the "Far Eastern concession" model to stimulate investment in social infrastructure projects. The authors reason that new instruments of debt financing – ESG-bonds, municipal and infrastructure bonds, crowdfunding, preferential budget lending – contribute to the growth of social investment projects, taking into account the assessment of regional sectoral risks, regulation and stimulating fiscal policy.

https://clck.ru/ia7jv

EVALUATION IN IMPACT INVESTING: WHERE WE ARE AND WHERE WE ARE GOING, CHAPTER IN THE BOOK "HANDBOOK OF RESEARCH ON GLOBAL ASPECTS OF SUSTAINABLE FINANCE IN TIMES OF CRISES" 2022, IGI Global

Eugenia Strano, Alessandro Rizzello and Annarita Trotta

The emergence of impact investing over the past decade has been accompanied by an increased interest of practitioners and scholars in the impact evaluation topic, one of the twofold pillars of the such an innovative financial approach. To contribute to the international debate, this study adopts a qualitative approach by obtaining results from a systematic literature review of extant research. This is useful to 1) identify the current existing impact evaluation approaches adopted in the field and 2) derive an empirical analysis in the impact investing sector with a focus on impact measurement in social impact bonds. The study opens interesting insights into recognizing the potential for the whole impact investing field, deriving both from theory and evidence of impact evaluation practices.

https://clck.ru/iYh5v

INFLUENCE OF MODERN "BUSINESS SOCIALIZATION" CONCEPTS ON COMPANIES' STRATEGIES

2022, Chelyabinsk State University Newsletter. E. V. Kozlova

More and more companies today take into account the environmental and social impact of their operations, while developing their strategies. Tightening environmental and social development requirements force companies to consider these in their development strategies and programs. Contemporary approaches to evaluating the effectiveness of sustainability projects tend to focus on measuring quantitative indicators (the number of activities carried out or the amounts invested), rather than on qualitative indicators (assessing the effectiveness of their impact on the environment). Despite widespread implementation of the sustainable development principles, there is still no unified evaluation methodology that would allow companies to measure their effectiveness and conduct comparative analysis within the country, industry or between individual enterprises. Increased public and stakeholder attention to corporate social responsibility results in the spread of negative phenomena such as impact washing.

https://clck.ru/iZt2P

BEHAVIOR CHANGE IN IMPACT INVESTING

2022, University of Michigan. Laura Dyer, Max Berry, Nathan Lohrmann, Max Odena

Climate change poses an existential threat to humanity, but funding to mitigate and adapt to a changing climate is not commensurate with the scale of the problem at hand. Across asset classes, there is insufficient funding for climate change mitigation and adaptation solutions. At the same time, however, over 140 billion dollars in private wealth is sitting idle, waiting to be deployed by its owners into philanthropic initiatives, charities, and income-generating investments, for example. There is a higher use for these funds, namely helping humankind mitigate and adapt to climate change. CapShift, our project partner, is a platform that empowers philanthropic and financial institutions, along with their clients, to mobilize capital for social and environmental change. It was founded with the idea that there needed to be a better way to give away and invest large sums of money in ways that benefit society and the environment. In 2020, they focused their energies on developing a racial justice framework to facilitate funding of racial justice-related opportunities. In 2021, their focus is on funding climate change mitigation and adaptation opportunities. In 2022, their focus is on funding agrifood solutions. Our team’s focus was on these 2021 and 2022 goals. CapShift found it’s hard to give away billions of dollars, let alone find uses for that money that will generate financial returns. While the latter makes intuitive sense for laypeople who might dabble in the stock market or retirement accounts, the former may sound nonsensical on its face; there should be plenty of people and organizations willing to accept money, the thinking goes. However, upon closer inspection, we see that it can, in fact, be challenging for high-net-worth individuals (HNWIs) and their fiduciaries, pensions, and other private wealth holders (together – "CapShift clients") to ensure their money will have the impact they want once it is given away, if they can find a worthy opportunity to which they can give their assets. Goals must be set and outputs, outcomes, and impacts of that money must be measured, reported, verified, and communicated. "Giving away" money for impact is sometimes as complicated as investing it for financial gain. Climate change mitigation, adaptation, and agrifood solutions represent an opportunity for CapShift clients to allocate their capital. Unfortunately, however, funding these opportunities are not presented to current and prospective CapShift clients in a way that inspires and mobilizes them to invest. We aim to change that.

https://clck.ru/iYpMG

THEORETICAL ASPECTS OF IMPACT INVESTING IN THE MODERN WORLD

2022, Science and Youth: Current Issues of Modern Scientific Research. E. S. Melnik

The article considers the definition of impact investing and analyzes its criteria. The author examines the benefits of impact investing, its impact on the society, and ways to accelerate the development of impact investing in Russia.

https://clck.ru/iZmsu

ESG INVESTING: GLOBAL AND RUSSIAN EXPERIENCE

2022, Economic and Social Problems of Russia. I. A. Chuvychkina

The article discusses the concept of responsible investing, its historical context and evolution. Particular attention is paid to the risks of responsible investing associated with the lack of reporting standards, ratings manipulation, and greenwashing. The author also touches upon the aspects of the climate change policy of the world’s major economies, the development of financial instruments and mechanisms necessary for «green» investment. An analysis of the Russian culture of responsible investing and the barriers to its implementation is conducted.

https://clck.ru/iZqyr

BETWEEN IMPACT AND RETURNS: PRIVATE INVESTORS AND THE SUSTAINABLE DEVELOPMENT GOALS

2022, Business Strategy and the Environment. Falko Paetzold, Timo Busch, Sebastian Utz, Anne Kellers

We investigate the expectations of wealthy private investors regarding the impact and financial return of sustainable investments. Our paper focuses on the sustainable development goals (SDGs) as a framework for investors’ attempts to create impact. We analyze the behavior of 60 high-net-worth individuals (HNWIs), a powerful yet overlooked investor segment. Our results show large allocations in line with the SDGs, which demonstrates these investors’ aim of achieving real-word changes. Furthermore, we show that these "impact investors" have a clear preference for SDGs that are associated with high financial returns. As such, we confirm that both impact and attractive financial returns are expected.

Our findings provide rich, deep insights into how HNWIs practice impact investing and their underlying motivations. We outline practical implications for different stakeholders, notably regarding the fact that financially attractive SDGs are likely to attract substantial amounts of capital, with other SDGs remaining underfunded.

https://clck.ru/iZuuu

THE STATE OF ESG INVESTING: A PORTFOLIO MANAGEMENT PERSPECTIVE

2022, The Journal of Impact and ESG Investing. Stephen M. Horan, Elroy Dimson, Clive Emery, Kenneth Blay and Glen Yelton

Environmental, social, and governance (ESG) strategies have experienced a massive inflow of capital over the past decade, despite investors having little concrete evidence that ESG investing accomplishes its purported goals. This capital inflow also happened without investors possessing the information, tools, and methods needed to evaluate and communicate their specific ESG values, objectives, and preferences. Without evidence of efficacy and clearly articulated investment objectives, it is impossible for investors with ESG intent to know whether they are receiving what they are paying for, to distinguish between investment managers based on nonfinancial objectives, and to improve the likelihood of achieving positive ESG investing outcomes. This article highlights the key challenges faced by ESG investors and portfolio managers implementing ESG investment mandates. Recommendations include an issuer reporting framework that supports portfolio reporting and evaluation as well as an ESG product template that focuses on nonfinancial investment objectives, process elements, and measurable outcomes.

https://clck.ru/iZRyJ

IMPACT BUSINESS AND GOVERNMENT: HOW THE ESG APPROACH IS CHANGING INVESTMENT

2022, Russian Regions in the Focus of Change: Collection of Reports. D. V. Amelicheva, E. A. Semyonova, N. E. Tikhanov, N. K. Shemetova

The traditional concept of investment is changing under the influence of global trends that have manifested themselves with particular clarity in the recent decades. The article considers the types of investment appearing under the influence of increased attention to corporate social responsibility, their features and advantages, the main reasons that led to cooperation between the government and businesses investing in large, socially significant projects, as well as the most likely outcomes of such implementation.

https://clck.ru/iZpP4

DEVELOPMENT OF COOPERATION BETWEEN BELARUS AND CHINA IN THE FIELD OF SOCIAL ENTREPRENEURSHIP

2022, BSU Publishing Center. A. S. Popkova

The author examines China’s existing social entrepreneurship support system. Particular focus is given to social investment funds, the China Social Enterprise and Investment Forum. Fast-growing business services platforms help social entrepreneurs plan and execute their strategic philanthropic projects. The author notes rapid advancement of the fintech industry and the growth of innovative service delivery models, including inclusive financing. Recommendations on the application of effective schemes to stimulate investment in socially-oriented businesses in the Republic of Belarus are provided.

https://clck.ru/ia5Jw

ASSESSING THE EFFECTIVENESS OF SOCIAL INVESTMENT AND THE IMPACT ON THE SUSTAINABILITY RATING OF COMPANIES

2022, Scientific Journal of NRU ITMO. Economics and Environmental Management series. Yu.D. Murmylo

This article discusses approaches to the establishment of a sustainable development concept. The authors cite various scientists’ debatable opinions on adapting the English word «sustainability» into Russian language and consider the options for replacing this term. Various researchers’ views on the definition of "sustainable development" are considered. The main sources of the reference base of this category are highlighted. The author investigates the place of sustainable development among other sciences, analyzes its relevance, indicates the motivation for application and highlights the problems of its research. The author also considers the relationship between the magnitude of costs and the effectiveness of sustainability actions. The paper proposes a methodology for building an information map of social investment vectors. Data from the largest corporations representing various sectors of the Russian business community is used for analysis. The companies’ investments are classified into four areas, based on the beneficiary (the company itself or the society) and application (internal or external investment). A correlation model used in the article demonstrates a direct relationship between social investment per employee and net profit volumes. The proposed methodology is relatively simple and universal in application to companies of different profiles and scales of operation. A further investigation of other variables that may affect the companies’ income levels is recommended. This approach can establish the basis for rating sustainability performance of various companies, providing a more reasonable pattern of causal relationships between various aspects of corporate social investment and company performance.

https://clck.ru/ia3A4

ARE BUSINESS ETHICS EFFECTIVE? A MARKET FAILURES APPROACH TO IMPACT INVESTING

2022, Journal of Business Ethics. Rodney Schmidt

We evaluate the effectiveness of impact investing from the perspective of the market failures approach (MFA) to business ethics. Under the MFA, businesses are ethically obligated to contribute to market efficiency by mitigating market failures. The MFA ethics literature emphasizes a negative externality interpretation of market failures, with ethical practice as self-regulation. We argue that the MFA also obligates businesses, and investors, to produce positive externalities, a form of private provision of public goods. We develop a graphical MFA ethical framework addressed to impact investing. The framework is based on impact projects’ dual financial and social returns. Dual returns trade-offs originate in market failures and increase with positive externalities. In practice, a key determinant of market failure and the size of returns trade-offs is the availability of intermediate public goods. This varies systematically across sectors and country-markets. We identify the market circumstances under which impact investing is feasible. We show how provision of positive externalities mitigates market failures. We show that the effectiveness of impact investing depends on the interaction of the determinants of feasibility and of the size of project trade-offs. We show how government supporting intervention, through blended finance vehicles, can improve impact investing effectiveness. Finally, we show that evidence of actual patterns of impact investing across sectors and countries supports our analysis.

https://clck.ru/iZVoT

PARTNERSHIPS FOR THE GOALS IN AFRICA: IMPACT INVESTORS AND SOCIAL ENTREPRENEURS THROUGH THE LENS OF THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS, CHAPTER IN WORLD SCIENTIFIC ENCYCLOPEDIA OF BUSINESS SUSTAINABILITY, ETHICS AND ENTREPRENEURSHIP

2022, World Scientific Encyclopedia of Business Sustainability, Ethics and Entrepreneurship. Oluwaseun Oguntuase

African countries performed poorly in achieving the Millennium Development Goals (MDGs) and are lagging behind the rest of the world in terms of achieving the United Nations Sustainable Development Goals (SDGs). In Africa, the achievement of development goals depends on the generation and success of entrepreneurship to address sustainability challenges. A major challenge to the success of development goals and entrepreneurship in Africa is lack of finance. Taking financial capital as a prerequisite resource to effectively exploiting social entrepreneurial opportunities, this chapter adopts the resourcebased entrepreneurship theory to identify impact investors as the providers of financial resources to social entrepreneurs for contributing to the achievement of SDGs in Africa. The chapter employs a systematic literature review and illustrative case examples to demonstrate how impact investment can play an essential role in attracting private capital to finance social enterprises toward the realization of SDGs in Africa. The chapter highlights how social entrepreneurs and impact investors distinguish themselves through their social and environmental objectives, and explores how stakeholders could best rally around the overlapping interests in impact investing and social entrepreneurship to achieve the UNSDGs. The chapter argues that investors and social entrepreneurs will play a significant role towards the achievement of SDGs in Africa.

https://clck.ru/iZQQw

SOCIAL IMPACT INVESTING: AN AUSTRALIAN PERSPECTIVE

24.12.2021, Routledge. Stewart Jones, Helena de Anstiss, Carmen Garcia

Social impact investing is gaining ground as one of the most important investment trends in the world. While the size of the social impact investing market is still relatively small in global terms, momentum continues to grow unabated. Australia in particular is looking to develop a vibrant and transparent social impact investment market. This book considers a number of innovative strategies and pragmatic policy initiatives that can see the social impact investment market flourish in Australia and internationally.

The book describes how social impact investing can enter the investment mainstream and how a high-quality regulatory framework governing the measurement, reporting and evaluation of social impact will be critical to building investor confidence and ensuring the credibility, effectiveness and transparency of this market. It also examines different approaches to measurement and evaluation that will ultimately be critical to the success of this market. The authors also recognize that governments have a pivotal role to play in growing the social impact investing market, not only in its capacity as a market facilitator and regulator but also as an active purchaser of social outcomes.

This book will be informative for those who wish to learn more about how governments, private investors, investment intermediaries, social enterprises, service providers and other market participants around the world can work together to initiate and grow a vibrant, transparent and well-functioning social impact investing market.

https://clck.ru/iYyQ2

IMPACT MEASUREMENT CONSIDERATIONS FOR PRIVATE MARKET INVESTORS

2022, The Journal of Wealth Management. Kenneth B. Trippe and Essma Bengabsia

Sustainable and impact investment assets within private markets have risen significantly over the past two decades, with private investment dollars that seek to create environmental or social impact increasing over twentyfold from 2000 to 2020 (Pitchbook, 2021). Yet impact measurement and management remain key challenges for investors and asset owners. In this article, the authors analyze existing approaches to impact measurement and introduce a methodology for calculating and aggregating impact metrics across a private portfolio. This methodology, built based on a mix of leading impact measurement frameworks and insights from expert consultants, provides investors and asset owners with guidance on how to capture, aggregate, and report on impact metrics across an entire portfolio.